Cocky Goliaths Can Fall Hard #ThrowBackThursday

The year was 2004. Two software giants duked for supremacy in the microcomputer market. Well, that’s not really true. They weren’t equally gigantic, at least in relative terms. Microsoft was the giant with revenue of $36 billion in 2004. Its “competitor” was Apple and in that same year, it had a revenue of $8.8 billion. While a nearly $9 billion of revenue cannot be labeled as a “small” company, Apple was significantly behind Microsoft in the race for control of the end user’s desktop.

The year 2004 was pivotal for Apple. Steve Jobs returned as CEO and directed the company with a new vision of taking already existing technology (i.e.: the mobile phone, music players, tablets, laptops, etc.) and creating a consistent user experience based on simplicity of design and usability. The result was a series of iPods, iPhones, iPads and MacBooks that have literally changed the way we think about personal and business computing. They also created a robust online support structure that had never been conceived from a consumer electronics company. In short, they created new, exciting versions of existing products, and with great marketing, iconic advertising, and superior support, they started growing a fan base. Not customers, but fans. Stark, raving fans. 

Not customers, but fans. Stark, raving fans.

Steve Ballmer, then Microsoft’s CEO, was asked in 2007 what he thought of the devices Apple was creating. Ballmer heartily laughed, and ridiculed the ridiculous $500 “fully subsidized with a plan” price for the phone. He opined that, “It doesn’t appeal to business users because it doesn’t have a keyboard….”. He further stated that Microsoft’s strategy of working with partners like Motorola offered phones that would have music and access the Internet. He closed by stating, “I really like our strategy,” (you can check out the video of this interview here. 

Fast forward to 2015 and look at the revenue numbers for both companies. Microsoft grew from $35 billion to $93 billion, a 9% CAGR. Not shabby by any reckoning. But consider Apple, who grew from that $8.8 billion to $234 billion. They sucked out Microsoft’s headlights as they blew by with an astonishing 34.75% CAGR. So goes the story that true innovation and the creation of stark raving fans is the key to overall success. Perhaps so.

 My point here, however, is that Microsoft had the advantage. They had more resources and commanded a much larger footprint of operating systems on microcomputers. They had a strategy and they didn’t consider Apple anything more than a niche company that focused on artists and computer-aided design applications. 

They had more resources and commanded a much larger footprint of operating systems on microcomputers.

Maybe Apple just happened to be in the right place at the right time. Maybe Steve Jobs was a once-in-a-lifetime genius. But maybe, just maybe, Microsoft could have become the true giant that Apple has become. To do so would have required a couple of elements. 

First, CEOs, regardless of the size of the company, need to be grounded. It is my personal belief that Ballmer was overconfident and showed a lack of respect for what was, at the time, an upstart company because he felt it was no threat to the prowess of Microsoft. Even if Apple wasn’t a threat, what is to be gained by ridiculing them publicly? It stands to reason that if a company as powerful as Microsoft was in 2004 had taken Apple seriously as a competitor, they would not now be dwarfed by them 2.5 times over.

Ballmer was overconfident and showed a lack of respect for what was, at the time, an upstart company because he felt it was no threat to the prowess of Microsoft.

Now, reality check #1: Ballmer has a net worth of $25 billion and owns the L.A. Clippers, and I own a 23’ Proline fishing boat. His overall track record is good, and he is clearly a success in nearly all measures (except, perhaps in comparison to Apple…). This is not an anti-Steve Ballmer rant. Regardless of whether you are the next Microsoft or whether you run a lawn care business in your local town, there is always a competitor. Someone is trying to create a better mousetrap. Someone is figuring out how to swap customers for raving fans. If that company is your competitor, regardless of how small they are, you should treat them seriously. Evaluate what they are doing, gather what information you can about their plans (in any possible but legal way), and have some strategic discussions about whether you should be looking at something new or radical as a pivot your company should make.

Evaluate what they are doing, gather what information you can about their plans (in any possible but legal way), and have some strategic discussions about whether you should be looking at something new or radical as a pivot your company should make.

Reality check #2: Steve Jobs also made numerous statements about Microsoft and others (like IBM) that can only be described as ungrounded. Only a fool laughs off competitors as not worth the time to consider. Here are a couple of the tamer ones: “There are lots of examples where not the best product wins. Windows would be one of those, but there are examples where the best product wins. And the iPod is a great example of that”, and “Our friends up north spend over five billion dollars on research and development and all they seem to do is copy Google and Apple.” Jobs is no better than Ballmer when it comes to Groundedness, but he recognized the winning strategy was creating a superior product and supporting it better than anyone else had. In 2009, he said, “Funny enough, 20 twenty years after we started Apple, there was nobody building computers for people again. You know? They were trying to sell consumers last year’s corporate computers. We said, ‘Well, these are our roots. This is why we’re here. The world doesn’t need another Dell or Compaq. They need an Apple.’”

 Ignoring your competition, large and small, is foolish. Mouthing off about how strong you are or how weak your competitors are is ego-driven bravado. Neither foolishness nor chest pounding will allow you to achieve your full success. And before you jump me about what a success that Microsoft and Apple became, consider this: with similarly talented management that was more grounded, could Microsoft and Apple have actually achieved more?

#ThrowBackThursday #Grounded